Understanding Wisconsin Sales and Use Taxes

Bob Denkert, CPA Auditing & Accounting Senior Manager   email
July 2011

  
With most states looking under the sofa cushions for cash to balance their budgets, there has been an increase in the enforcement of sales and use tax laws as a way to raise funds.

Wisconsin businesses are required to collect state, county and stadium sales tax on taxable sales in the state.  Even if your main business is a tax-exempt service, income you receive from other sources may be subject to sales tax.  Some examples of sales that would be subject to Wisconsin sales tax are:

• equipment;
• furniture;
• supplies;
• equipment rental; and
• copying charges. 

In addition, if you control a vending machine, the sales are taxable.  Therefore, we recommend registering for sales and use tax filing even if you may not currently have a liability for the tax. 

Businesses in Wisconsin are also required to pay sales tax on tangible personal property purchases (almost everything you use in your business) and services, which would include any shipping charges.  If items are purchased out of state that would be charged sales tax in Wisconsin and the vendor does not charge you Wisconsin sales tax, you must pay use tax on these items.  There are also some services that are subject to sales tax including, but not limited to, catering, dry cleaning and equipment repairs.

Since it is more likely that you will need to pay sales or use tax than collect sales tax, you should do the following to make sure you are reporting and paying the appropriate amounts of sales and use tax:

• If you purchase items from a Wisconsin vendor and sales tax isn’t charged, ask why not.  Often, a vendor will not charge tax because they mistakenly assume you are exempt. 
• Verify you are being charged the correct tax rate.  In addition to the 5 percent state sales tax, there is a 0.5 percent county sales tax for most of the surrounding counties and a 0.1 percent stadium sales tax if you are located in Milwaukee, Ozaukee, Washington, Racine and Kenosha counties.  (Click here for a listing of the counties charging 0.5 percent county sales tax). 
• If you make any purchases and are not charged sales tax, whether from vendors in Wisconsin or other states, keep copies of the invoices and place them in a separate folder to use when preparing your sales and use tax form.
• If you make purchases using a credit/debit card, keep the charge slips so you are able to verify whether you paid Wisconsin sales tax.  If no tax was paid, add copies of the slips to your folder for preparation of the sales and use tax form.  This will help in the audit process because one of the first items an auditor asks for during an audit is copies of credit card bills.
• If you make purchases over the internet and Wisconsin sales tax is not paid, add copies of the invoices to your folder.

There can be consequences if you do not collect and report sales tax as well as if you do not pay sales tax on out-of-state purchased items.  If you do not report sales tax, then happened to be audited and it is found out that you have not paid appropriate sales tax, there is no statute of limitations on how far back the state can go to collect the unpaid taxes.  If you make out-of-state purchases that are not reported you can be charged penalties and interest on the items.  By being aware of your responsibilities and tracking your purchases, you will be able to avoid any sales and use tax surprises during an audit. 

If you have any questions, or for more information, email Bob Denkert.